Fewer Lawsuits Ease Public Pathway as Reddit Wakes Up IPO Market

“The decrease in the number of parallel or state court filings jumps out,” said Robert Fumerton of Skadden, Arps, Slate, Meagher & Flom LLP in New York. “I think it’s obviously attributable, in large part, to companies putting federal forum selection clauses in their registration documents and the willingness of courts to enforce them,” he said.

Those forum selection clauses blocking state-court suits may be reducing IPO litigation in federal courts as well. If weaker cases used to migrate to state court because federal courts had more expertise in evaluating securities claims, “then cases that are more likely meritless will not get filed” with state courts now unavailable, said Joseph Grundfest of Stanford Law School.

Fumerton also pointed to legal changes making state courts, particularly in New York, not “a more hospitable forum for plaintiffs than federal court.” New York state courts have been dismissing cases and imposing discovery stays under the Private Securities Litigation Reform Act, he said.

Source: Fewer Lawsuits Ease Public Pathway as Reddit Wakes Up IPO Market